Airbnb: $100B+ brand in making

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This article is just a high level summary about Airbnb ahead of IPO. Since it is just compilation of data / thoughts, it may lack flow.

Airbnb is coming public soon with a truly remarkable journey especially in 2020. It all started in 2007 with 2 hosts and now it has 4M hosts in 100k cities and 220+ countries. 

Things that I like the most about Airbnb business model: large TAM (and SAM), growth at scale, global network effects, fragmented supply and fragmented demand, attractive unit economics / margin profile, and a great leadership team. 

Since inception, Airbnb has 850M guests arrival welcomed with $110B in host earnings. 

In roadshow, what Brian calls as “resilient business” during COVID, is actually sign of great leadership, and ability to “right the ship” under extreme conditions. I am glad it happened right before company is coming public because it gives us a lot of insights about mgmt. and team. Based on this experience, public market investors should “buy any dip” if there is a hiccup during quarterly earnings in coming years. In fact, I wrote this linkedin post (see image) during COVID times as I was myself uncertain how things will unfold.

Airbnb describes 6 unique strengths of it’s business model:

  • Unique host community
  • Engaged guest community
  • Globally recognized brand
  • Global network
  • Custom built platform 
  • Design driven approach

Out of these, first one is most important as whole business model depends on hosts. Some interesting stats around hosts:

  •  90% individual hosts
  • 55% women hosts
  • 86% outside USA
  • 79% of new hosts come directly to Airbnb
  • 23% of new hosts begin as guests

Year 2019 stats: 

  • 50% of new listings got booked within first 4 days of listing
  • 54M active bookers booked 327M active nights and experiences with $38B in Gross booking value and 4.8B in GAAP rev. 
  • No one city is more than 2.5% of rev.
  • >68% of guests left reviews with 83% of being 5 star reviews
  • 69% of rev is from repeat guests with 84% of existing guests 
  • >300 cities welcomed 100k+ guests 

Majority of listings are on Airbnb only. Please read this line again. This is one very important point in differentiating Airbnb against other OTAs. This enables very high organic traffic vs paid traffic mix for Airbnb resulting in a lower performance marketing spend relative to and others. For example, In 2019, 77% of traffic was direct and unpaid. Post COVID, in Q3-20, 93% of traffic was direct and unpaid. By Sep 20, total Direct & unpaid traffic was growing Y/Y. This is extra-ordinary brand strength. 

I believe Airbnb can be MOST profitable business model in online travel (37% EBITDA, 24% FCF margins in Q3-20) due to it’s unique brand and it can be worth >$100B+ by 2023 – 2024.

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